Stock Shortages May Deplete Brand Loyalty Fast

Many consumers fear a shortfall of highly desired items this holiday season, and disappointed shoppers may switch to other brands, suggests a survey Elementum released Thursday.

The firm polled 2,001 adults in the U.S. this fall. About 48 percent of the participants who were parents of kids under 18 expressed concern about product shortages.

“Companies won’t be happy to know that nearly half their consumers … are concerned about product shortages,” said Rob Cheng, head of growth at Elementum.

“Numbers like this can’t be analyzed as a ‘glass half full’ situation, because supply chains need to deliver far more than half the time to sustain financial success,” he told CRM Buyer.

Twenty-eight percent of the participants who were parents of minor kids had worries over the availability of popular toys such as Pokémon, Furreal Friends, and Hatchimals; 21 percent feared toys inspired by recent movies would be out of stock; and 15 percent of parents were anxious about smartphone shortages.

Millennial survey participants were even more sensitive to product shortages. Fifty-six percent said they felt alarmed when they heard about shortages of a desired product, and 28 percent admitted they feared missing out on buying the product.

The Loyalty Myth

Manufacturers can be hit hard if retailers run out of supplies. Sixty-three percent of the survey respondents said they would be somewhat-to-highly likely to look for an alternative brand if their favorite electronics brand were hit by a supply shortage. Only 14 percent would remain loyal to their brand.

However, “I’m not sure that Apple is a good example,” said Nikki Baird, managing partner at RSR Research.

Apple “tends to engender a lot of loyalty and passion,” she told CRM Buyer.

For companies like Nintendo, “who underdelivered for the NES Classic, that gift money went somewhere else,” Baird said. “Will it be there for them after the holidays are over? I think the company’s taking a big risk there.”

Customer loyalty is even weaker for companies that issue product recalls.

Seventy-four percent of survey respondents indicated they would lose trust in their preferred electronics brand if a product they bought were recalled, Elementum found. Thirty-eight percent said it would take them more than a month to regain their trust; 12 percent said it would take more than a year; and 9 percent said they never would trust the brand again.

The Silver Lining for Retailers

“This is an area of opportunity for retailers to show related or similar products if the one the customer was looking for is out of stock,” observed Cindy Zhou, a principal analyst at Constellation Research.

Alternatively, retailers could indicate when the shelves likely would be restocked, in order to manage customer expectations, Zhou suggested.

Retailers “are pretty miserable in capitalizing on this kind of demand,” RSR’s Baird pointed out. “They do very little to offer alternative product suggestions or capture how much demand is actually out there, so that when [the product is] back in stock, they can maximize their opportunity to sell it.”

Most retailers “just take the product down off their website, or leave an empty hole on the shelf, and wipe their hands of the matter,” she said, describing this as “pretty short-sighted.”

Who Carries the Can?

Both manufacturers and retailers have to ensure an adequate supply, Elementum’s Cheng said, but “they have no reasonable means to do so.”

That’s because of the lack of global, end-to-end visibility in the supply chain, which means there’s “no ability to assign ownership to problems, he explained. “It’s very hard for different parties to stay aligned and respond quickly to issues and disruptions in the supply chain.”

Giving all parties real-time access to crucial information, said Cheng, will ensure adequate supplies at all times.

Richard Adhikari has written about high-tech for leading industry publications since the 1990s and wonders where it’s all leading to. Will implanted RFID chips in humans be the Mark of the Beast? Will nanotech solve our coming food crisis? Does Sturgeon’s Law still hold true? You can connect with Richard on Google+.